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3 CONTENTS Section Page No. INTRODUCTION... 1 The Purpose of This Guide...1 The Changing Economic Development Landscape...1 Bricker & Eckler: Commitment to Economic Development...1 STATE OF OHIO TAX CREDIT PROGRAMS... 3 Job Creation Tax Credit Program...3 Home-Based Employee Job Creation Tax Credit Program...4 Non-Refundable Job Retention Tax Credit Program...6 Refundable Job Retention Tax Credit Program...7 Historic Preservation Tax Credit Program...8 New Markets Tax Credit Program...9 Motion Picture Tax Credit Program...10 STATE OF OHIO GRANT PROGRAMS (Roadwork Development) Grant Program...12 Job Ready Sites Program...12 SiteOhio Certification Program...13 Clean Ohio Revitalization and Assistance Funds...14 Ohio Air Quality Grant Assistance Program...15 STATE OF OHIO LOAN/BOND PROGRAMS Direct Loan Program...16 Regional 166 Direct Loan Program...17 Minority Business Direct Loan Program...19 Enterprise Bond Fund Program...20 Industrial Revenue Bond Financing...21 Qualified Energy Conservation Bonds...22 Property Assessed Clean Energy Bonds...23 STATE INFRASTRUCTURE BANK PROGRAMS State Infrastructure Bank Loans...24 State Infrastructure Bank Bonds...26 JOBSOHIO LOAN AND GRANT PROGRAMS JobsOhio Growth Fund Loan...28 JobsOhio Workforce Grant...29 JobsOhio Economic Development Grant...30 i

4 JobsOhio Revitalization Loan and Grant Fund...31 JobsOhio Research and Development Grant...32 MUNICIPAL TAX CREDIT PROGRAMS Municipal Job Creation Tax Credit Program...34 Municipal Job Retention Tax Credit Program...34 LOCAL PROPERTY TAX ABATEMENT PROGRAMS Enterprise Zone Program...36 Community Reinvestment Area Program...37 Tax Increment Financing...39 Undeveloped Property Tax Abatement...41 LOCAL SPECIAL PURPOSE ECONOMIC DEVELOPMENT DISTRICTS/ENTITIES Joint Economic Development Districts...42 New Community Authorities...44 Transportation Improvement Districts...46 Special Improvement Districts...47 Community Improvement Corporations...50 Port Authorities...52 Downtown Redevelopment Districts...55 FEDERAL TAX CREDIT PROGRAMS Historic Preservation Tax Credit Program...57 New Market Tax Credit Program...58 FEDERAL LOAN PROGRAMS (a) Loan Program Loan Program...61 FEDERAL GRANT/SPECIAL PURPOSE PROGRAMS EB-5 Immigrant Investor Program...63 U.S. Foreign-Trade Zone Program...64 ii

5 INTRODUCTION The Purpose of This Guide Economic development has been defined as the entire array of activities, some conducted by government, and some by the private sector, often in partnership with government, which are intended to expand the economy of a designated area to increase the number of jobs available to the population of that area. 1 This guide outlines the array of tools with which Ohio economic development practitioners can stimulate or induce development to occur or occur sooner than market forces sometimes allow in their communities. This guide also assists practitioners by identifying programs and clarifying changes to existing programs, and introducing effective new options to consider. If knowledge is power, this guide provides practitioners with the unique ability to empower their communities or businesses to accomplish a variety of economic development objectives. The Changing Economic Development Landscape During one of the most financially challenging times in our country s history, the state of Ohio adapted and radically redesigned the way it does business with public and private entities, as demonstrated by the restructuring of the Ohio Department of Development (ODOD) into the Ohio Development Services Agency (ODSA) 2 and the creation of JobsOhio. Bricker & Eckler LLP (Bricker) was an instrumental part of this process through its longstanding service and relationships with key industry leaders, as well as its collaborative work with state and local government organizations to position Ohio for growth and sustained prosperity. 3 Bricker & Eckler: Commitment to Economic Development Bricker provides legal advice to a wide range of clients, including businesses, real estate developers, site selection consultants, governmental agencies and public entities. To 1 Source: 2 Gov. John Kasich signed S.B. 314, of the 129 th Ohio General Assembly Regular Session , into law on June 26, 2012, which changed the name of the Ohio Department of Development (ODOD) to the Ohio Development Services Agency (ODSA) effective September 26, ODSA is the successor to ODOD with respect to a number of programs and powers. 3 Visit the DevelopOhio Resource Center at and for various public finance and economic development resources from Bricker & Eckler LLP. Copyright 2017 by Bricker & Eckler LLP. All rights reserved. This information is not intended to constitute and is not a substitute for legal or other advice. 1

6 serve clients and markets creatively, Bricker integrates a broad range of capabilities and a network of relationships to position its clients projects for short- and long-term success. Bricker helps its economic development clients define and implement their overall financing structures to maximize the success of their projects by leveraging various financing sources and available incentive programs. Along the way, Bricker also helps identify and execute strategies to achieve clients overall business objectives, addressing matters pertaining to state taxes, transportation and logistics, land-use planning and development. 2

7 STATE OF OHIO TAX CREDIT PROGRAMS Programs Discussed: Job Creation Tax Credit Program Historic Preservation Tax Credit Program Home-Based Employee Job Creation Tax Credit Program New Markets Tax Credit Program Non-Refundable Job Retention Tax Credit Program Motion Picture Tax Credit Program Refundable Job Retention Tax Credit Program Job Creation Tax Credit Program The Ohio Job Creation Tax Credit 4 (JCTC) is a refundable tax credit provided to companies generally creating at least 10 new jobs with a minimum annual payroll of $660,000 5, at the time the Ohio Tax Credit Authority (the Authority ) approves the project, that pays at least 150 percent of the federal minimum wage for the entirety of the tax credit term. 6 The JCTC is measured as a percentage of the state income tax withholdings for all new full-time equivalent employees 7 hired under the program and is applied primarily toward the company s commercial activity tax liability. It also may be applied against the insurance premiums tax or an individual s Ohio personal income tax obligations. Should the amount of the credit exceed the company s commercial activity tax liability for any given year, the difference is refunded. 8 The Authority is charged with reviewing and approving applications and setting the tax credit rate and term. Companies can receive tax credits under the program for up to 75 percent of state income taxes withheld for a period of up to 15 years. 9 The rate and term are generally based on the number of jobs to be created, the new payroll to be generated 4 See O.R.C. Section and O.A.C. rules 122: through 09. This overview pertains to the JCTC Program for projects approved after October 17, A payroll of $660,000 approximates to 175 percent of the federal minimum wage for 25 net new employees. The payroll threshold for this program will increase as federal minimum wage increases. 6 See O.A.C rule 122: The JCTC Program defines a project site as a single location from which operations are conducted. However under the terms of the statute, manufacturers may designate multiple locations, consisting of one or more integrated buildings or structures within a 15-mile radius, as one project site. 7 Full-time equivalent employees means the quotient obtained by dividing the total number of hours for which employees were compensated for employment in the project by Source: 9 Service-oriented projects must demonstrate that at least 51 percent of project site-attributable sales or revenues attributable to the project are generated from buyers located outside Ohio. 3

8 by the project, the fixed-asset investment in the project and the extent of the interstate competition for the project. 10 A company typically applies for the credit before committing to the project as the applicant must demonstrate that the tax credit is a major factor in its determination to expand or locate in Ohio. The major factor requirement, however, may also be met based on a recommendation from the chief investment officer of JobsOhio and the director of ODSA. If a taxpayer has already started a project, the major factor requirement may be met through such a recommendation made within six months after the JCTC application was received by the Authority. This allows JCTC applicants greater flexibility and helps to expedite the application approval process by alleviating sole reliance on the Authority which only meets monthly. Finally, the company must commit to maintain operations at the project site for (a) the term of the tax credit plus three years or (b) seven years, whichever is greater. 11 Home-Based Employee Job Creation Tax Credit Program The Ohio Home-Based Employee Job Creation Tax Credit 12 (HBJCTC) is a refundable tax credit provided to companies generally creating at least 10 new jobs with a minimum annual payroll of $660,000 that pays at least 131 percent of the federal minimum wage. 13 The HBJCTC Program allows companies to apply for the credit on the basis of employees performing services primarily from their Ohio residences exclusively for the benefit of the project. The director of ODSA may require companies to provide the home-based employees with health care benefits and tuition reimbursement. 14 The law governing the HBJCTC Program also prohibits the taxpayer from claiming the tax credit until the taxable year in which the company employs at least 200 more employees than the number of employees it employed on June 30, Source: Ohio Development Services Agency, 11 See. O.R.C. section See O.R.C. section Governor John Kasich signed Sub H.B. 327, of the 129 th Ohio General Assembly Regular Session , into law on June 6, The law became effective on September 6, percent of federal minimum wage is approximately $9.50 per hour. Federal minimum wage is $7.25 per hour. 14 See O.R.C. section (Q). 15 See O.R.C. section (D)(9). 4

9 The HBJCTC is measured as a percentage of the state income tax withholdings for all new full-time equivalent employees 16 hired under the program and is applied primarily toward the company s commercial activity tax liability. It also may apply against the insurance premiums tax or an individual s Ohio personal income tax obligations. Should the amount of the credit exceed the company s commercial activity tax liability for any given year, the difference is refunded. 17 The HBJCTC Program functions in a very similar manner to the JCTC Program; however, they are two distinct programs. If a taxpayer employs both home-based employees and employees who are not home-based in a project, the taxpayer must submit separate applications and enter into separate tax credit agreements for the project. 18 The Authority is charged with reviewing and approving applications and setting the tax credit rate and term. Under the HBJCTC Program, companies may receive a percentage of withheld state income taxes for a period of up to six years. 19 The rate and term are generally based on the number of jobs to be created, the new payroll to be generated by the project, the fixed-asset investment in the project and the extent of the interstate competition for the project. A company typically applies for the credit before committing to the project as the company seeking assistance under the HBJCTC Program must demonstrate that the tax credit is a major factor in its determination to expand or locate in Ohio. However, as is the case for the JCTC Program, to alleviate sole reliance on the Authority and expedite the application approval process, if a project is already underway, the major factor requirement may be met through a recommendation from the chief investment officer of JobsOhio and the director of ODSA. The major factor requirement may be met through such a recommendation made within six months after the HBJCTC application has been received by the Authority. For approval to the HBJCTC Program, a company must commit to maintain operations at the project site for (a) the term of the tax credit plus three years or (b) seven years, whichever is greater Full-time equivalent employees means the quotient obtained by dividing the total number of hours for which employees were compensated for employment in the project by Source: JobsOhio, 18 See O.R.C section (C)(1). 19 See O.R.C. section (D)(2)(b); as the HBJCTC has been approved by the Ohio General Assembly for a trial period of six years; therefore, no award may exceed that term. 20 See. O.R.C. section

10 The HBJCTC has been approved by the Ohio General Assembly for a six-year trial period. The director of ODSA is required to submit a report at the conclusion of the trial period detailing the effect and number of credits granted, as well as an analysis of the program s success during the trial period. At that time, the General Assembly will make a decision whether to extend or discontinue the program. Non-Refundable Job Retention Tax Credit Program The Ohio Non-Refundable Job Retention Tax Credit 21 (Non-Refundable JRTC) is a tax credit provided to companies that commit to retain at least 500 full-time equivalent jobs 22 at their project site 23 or maintain an annual payroll of at least $35 million in Ohio. Companies must also commit to a fixed-asset investment of $50 million for manufacturing or $20 million for corporate and professional service 24 related companies. The credit granted under the Non-Refundable JRTC allows participating companies to receive a credit equal to a portion of the state income taxes withheld from all eligible existing full-time employees retained under the program and is applied primarily toward the company s commercial activity tax liability. It also may apply against personal income tax obligations. 25 Should the amount of the credit exceed the company s commercial activity tax liability for any given year, the difference is not refunded. In the event the amount of the Non-Refundable JRTC is greater than the taxpayer s state tax liability, any unused portion may be carried forward up to three years. 26 The Non-Refundable JRTC Program is designed for use exclusively by large-scale capital investment projects. In consideration of a company s commitment to significantly invest in the acquisition, construction, renovation or repair of its facilities and/or machinery and equipment, the Non-Refundable JRTC Program will offer substantial tax savings. In general, the Non-Refundable JRTC is structured to resemble the Job Creation 21 See O.R.C. section and OAC rules 122: through 06. This overview is for the Non- Refundable JRTC Program for projects approved after October 17, Full-time equivalent employees means the quotient obtained by dividing the total number of hours for which employees were compensated for employment in the project by The JRTC Program defines a project site as a single location from which operations are conducted. However, under the terms of the statute, manufacturers may designate multiple locations consisting of one or more integrated buildings or structures within a 15-mile radius as one project site. 24 The capital investment must be completed within the three consecutive calendar years preceding the taxable year in which the company first claims the tax credit. 25 The company may not begin receiving job retention tax credit assistance until the minimum investment is completed. 26 Source: Ohio Development Services Agency, 6

11 Tax Credit Program, incorporating a number of similar programmatic requirements and conditions for participation. 27 The Authority is charged with reviewing and approving applications and setting the tax credit rate and term, and may issue tax credits under the program allowing companies to receive a credit up to 75 percent of the state income taxes withheld from eligible full-time equivalent employees for a period of up to 15 years. A company must apply to ODSA and be approved for the credit by the Authority before committing to the project; the recent legislative change providing more flexibility for the Ohio Job Creation and Home-Based Employee Job Creation Tax Credit programs 28 did not apply to this program. Lastly, the applicant must commit to maintain operations at the project site for (a) the term of the tax credit plus three years or (b) seven years, whichever is greater. Refundable Job Retention Tax Credit Program The Ohio Refundable Job Retention Tax Credit 29 (Refundable JRTC) is a tax credit provided to companies that commit to 1) retain at least 500 full-time equivalent jobs 30 at their project site 31 and maintain an annual payroll of at least $20 million or 2) maintain an annual payroll of at least $35 million in Ohio for the entire term of the credit. Companies must also commit to a fixed-asset investment of $5 million. The credit granted under the Refundable JRTC allows participating companies to receive a credit equal to a portion of the state income taxes withheld from all eligible existing full-time employees retained under the program and is applied primarily toward the company s commercial activity tax liability. It also may apply against personal income tax obligations. Should the amount of the credit exceed the company s commercial activity tax liability for any given year, the difference is refunded. 27 Source: Ohio Development Services Agency, 28 See O.R.C section (C)(2)(a). 29 See O.R.C. section (B)(3). The refundable JRTC in O.R.C. section (B)(3) should not be confused with the refundable JRTC in O.R.C. section (B)(2). 30 Full-time equivalent employees means the quotient obtained by dividing the total number of hours for which employees were compensated for employment in the project by The JRTC Program defines a project site as a single location from which operations are conducted. However, under the terms of the statute, manufacturers may designate multiple locations consisting of one or more integrated buildings or structures within a 15-mile radius as one project site. 7

12 The Refundable JRTC Program is designed for use exclusively by large-scale capital investment projects. In consideration of a company s commitment to significantly invest in the acquisition, construction, renovation or repair of its facilities and/or machinery and equipment, the Refundable JRTC Program will offer substantial tax savings. In general, the Refundable JRTC is structured to resemble the Job Creation Tax Credit Program, incorporating a number of similar programmatic requirements and conditions for participation. 32 The Authority is charged with reviewing and approving applications and setting the tax credit rate and term, and may issue tax credits under the program allowing companies to receive a credit up to 75 percent of the state income taxes withheld from eligible full-time equivalent employees for a period of up to 15 years. A company must apply to ODSA and be approved for the credit by the Authority before commencing the project. Lastly, the applicant must commit to maintain operations at the project site for (a) the term of the tax credit plus three years or (b) seven years, whichever is greater. Historic Preservation Tax Credit Program The Ohio Historic Preservation Tax Credit 33 (OHPTC) provides a tax credit to owners and long-term lessees of historically significant buildings equal to 25 percent of the qualified rehabilitation expenses (QRE), not to exceed the QRE estimates in the application, up to a maximum of $5 million. The $5 million maximum, however, may be exceeded if the project is approved as a catalytic project; however, this exception is being discontinued after the FY biennium. QREs are hard construction costs that meet the requirements of the U.S. Secretary of Interior s Standards for Rehabilitation of Historic Properties or some soft costs such as architectural or engineering fees. Funding is provided to applicants 34 through competitive rounds based on economic benefit, regional distributive balance and economic impact based on a cost-benefit analysis. The OHPTC can be applied against the applicant s domestic and foreign insurance premium, financial institutions tax or Ohio individual income taxes. Applicants that 32 Source: Ohio Development Services Agency, 33 See O.R.C. section and O.A.C. rule 122: An eligible applicant is the fee simple owner or qualified lessee of the building described in the application and is a non-governmental entity. 8

13 complete their project and receive a tax credit certificate with an effective date prior to June 30, 2017 can apply the tax credit against applicable commercial activity taxes. 35 The applicant must also demonstrate that the issuance of an OHPTC is a major factor in the applicant s decision to rehabilitate the historic building or to increase the level of investment in the rehabilitation of the historic building. A building is eligible if it is individually listed on the National Register of Historic Places, located in a registered historic district, certified by Ohio s preservation officer as being of historic significance to the district or listed as a historic landmark by a certified local government. A project may include more than one historic building if the historic buildings are in close proximity, within the same jurisdiction, and if rehabilitation activities and costs are undertaken by the same owner. Each historic building in a multiple building project is subject to the eligibility requirements of a single historic building. ODSA will accept and review applications on a semiannual schedule (in rounds) each fiscal year. 36 All applicants shall notify both ODSA and the Ohio Historic Preservation Office prior to submitting an application and are strongly encouraged to schedule a preapplication meeting with both offices. There is an aggregate limit of $120 million for the OHPTC credits during each fiscal biennium. New Markets Tax Credit Program The Ohio New Markets Tax Credit 37 (NMTC) is a nonrefundable tax credit designed to incentivize investors to fund businesses in qualified active low-income communities in Ohio. 38 The NMTC Program was designed in 2009 to leverage the Federal New Markets Tax Credit Program to attract investment into the state and spark revitalization in Ohio s lowincome communities. Eligible areas in the state that qualify for the program are lowincome communities: 1) that contain census tracts that have a poverty rate of 20 percent or higher; or 2) in which the median income is below 80 percent of the greater of (a) statewide median income or (b) metropolitan median income. 35 See 36 First round of fiscal year (July 1 December 31); Second round of fiscal year (January 1 June 30). 37 See O.R.C. sections , , , , , and ; O.A.C. chapter 122: See 9

14 Eligible applicants of the ONMTCs are Community Development Entities (CDEs) that have been allocated Federal New Markets Tax Credits serving Ohio, through a competitive process. Investors (insurance companies or financial institutions) provide cash to a CDE in exchange for an ONMTC. The CDE, in turn, uses the investor s cash to finance projects in low-income communities. The ONMTCs may be applied against the investors insurance premium or financial institution taxes and are structured to be used over the course of seven years. The total tax credit value will be 39 percent of the investment, with the yearly percentage of tax credits being: Zero percent for each of the first two years; Seven percent for the third year; and Eight percent for the next four years. The amount of the tax credit claimed may not exceed the amount of the taxpayer s state tax liability for the tax year for which the credit is claimed. Although the credits are nonrefundable, they may be carried forward for up to four years. The maximum state tax credit impact in any fiscal year may not exceed $10 million. The maximum amount of state tax credits for one project may not exceed $1 million. Motion Picture Tax Credit Program The Ohio Motion Picture Tax Credit 39 is a refundable, transferable tax credit taken against the income or commercial activity tax for motion pictures produced in Ohio. The credit equals 30 percent of the sum of production cast and crew wages plus other eligible in-state spending. The law broadly defines the term motion picture as entertainment content created in whole or in part within the state for distribution or exhibition to the general public. Eligible production projects must spend a minimum of $300,000 in the state of Ohio to qualify and the production activities may include: Commercial Digital Media Documentary Feature Film 39 See O.R.C. sections , , and

15 Interactive Game Interactive Television Interactive Website Interstitial Television Programming Long-Form Specials Mini-Series Music Video Pilot Series Sound Recording Trailer Video Video Game Video Teaser/Demo Eligible productions may apply to the director of the ODSA for certification. Upon approval, the production can commence. ODSA will not issue a tax credit certificate before completion of the production. 11

16 STATE OF OHIO GRANT PROGRAMS Programs Discussed: 629 (Roadwork Development) Grant Program SiteOhio Certification Program Job Ready Sites Program Clean Ohio Revitalization and Assistance Funds 629 (Roadwork Development) Grant Program The 629 (Roadwork Development) Grant Program (629 Program) was created to support and promote economic development and job creation by providing grant assistance for public roadway improvements, including engineering and design costs, for eligible projects throughout the state of Ohio. 629 Program grants, administered through JobsOhio and the ODSA, typically provide funding up to $500,000 or 50 percent of the eligible project costs, whichever is less. The project must create new or retain existing jobs in Ohio. The 629 Program is available for company projects primarily involving manufacturing, research and development, technology, corporate headquarters and distribution activity. Retail projects are ineligible. 629 Program grants are usually provided by ODSA directly to a local jurisdiction and require local participation. All 629 Program grants are contingent upon State of Ohio Controlling Board approval and are provided on a reimbursable basis. Projects are typically given an 18-month project completion date from the time of State of Ohio Controlling Board approval. Local jurisdictions must report on job creation after the 18-month project completion date has passed. The 629 Program is funded with state gas tax dollars; therefore, the available funding level varies each fiscal year. Funds may be used for costs directly related to public roadwork improvements, including engineering and design costs. Funds are distributed on a first-come, first-served basis. Job Ready Sites Program The Ohio Job Ready Sites (JRS) Program 40 was created to bolster the state of Ohio s portfolio of commercial and industrial developable sites, but was last funded in See O.R.C. sections through , as well as the program rules at O.A.C. 122: through 122:

17 ODSA continues to work with projects that are not yet complete or certified. Properties in this program were strategically chosen for their ability to provide optimal infrastructure capabilities and attract economy-shifting investment. Grant funding provided by the JRS Program was targeted to offset costs traditionally incurred in speculative commercial and industrial development to accelerate investment decisions and maximize the development potential of each property. 41 Projects that received funding from the JRS Program must satisfy stringent industry standards in order to receive certification. These standards were developed by ODSA and third-party engineering and site selection firms with numerous years of experience in commercial and industrial development. A JRS certification ensures future investors that the property meets site selection standards and includes the necessary attributes demanded by today s leading corporations. 42 SiteOhio Certification Program The SiteOhio Certification 43 (SiteOhio) Program was established in 2012 and is designed to increase Ohio s portfolio of available industrial, manufacturing and commercial locations, by certifying and marketing eligible sites across Ohio based on site characteristics and community assets. The goal of the program is to assure future investors that the prospective property meets the state s site selection standards and leverages previous investments in infrastructure (i.e., 629 Roadwork Fund, JRS Program, etc.) to better support a project. While under the umbrella of ODSA, in 2015, ODSA contracted with JobsOhio to administer the program. An eligible project is any project that, upon completion, will be a site and/or facility primarily intended for commercial, industrial and manufacturing uses. Eligible projects do not include sites and/or facilities intended primarily for residential, retail or government use. A political subdivision (i.e., city, township, county, school district, port authority, etc.) or individual may apply for certification of a site. The applicant, however, must be the property owner or an authorized representative of the owner. 41 Source: Ohio Development Services Agency, 42 For more information on the program and guidelines, visit the JRS webpage on ODSA s website at 43 See O.R.C. sections The program became effective on 9/4/

18 Under the SiteOhio Program, an eligible applicant must submit an application via to both ODSA and JobsOhio. 44 The applicant will then be contacted by a JobsOhio agent to submit additional materials for evaluation in accordance with the program s scoring criteria and scoring instruments. 45 There is no fee for submitting an application.. If the site meets all the scoring criteria and is approved for certification, the applicant will be issued an approval letter by the Director of ODSA, at which time the applicant will be required to submit a $500 certification fee. Upon payment of this fee, the site will be included in the state s inventory of sites ready for immediate development by end users, and JobsOhio will undertake to actively market the site. Clean Ohio Revitalization and Assistance Funds The Clean Ohio Revitalization Fund and the Clean Ohio Assistance Fund were established to provide assistance in brownfield revitalization, providing grants to assess environmental concerns and remove environmental obstacles and blight. 46 The programs were modified in 2013 and new projects are no longer being funded. ODSA, however, continues to oversee ongoing projects and provide technical assistance. More information on each program is provided below: Clean Ohio Assistance Fund The Clean Ohio Assistance Fund (COAF) was a discretionary grant program serving communities designated as Ohio Priority Investment Areas. 47 Grants were available for up to $300,000 for environmental site assessment, and up to $750,000 for remediation projects. The COAF Program has leveraged $20.00 of investment per grant dollar through the assessment and redevelopment of more than 225 former commercial and industrial properties. The program has provided grants to assess environmental concerns and remove environmental obstacles and blight, addressing more than 4,500 acres of brownfield property to date. 48 Clean Ohio Revitalization Fund The Clean Ohio Revitalization Fund (CORF) was a statewide competitive grant program, governed by the Clean Ohio Council, wherein communities competed for grants up to $3 million to acquire, demolish, 44 See ORC section A map of Ohio s Priority Investment Areas can be found at 48 See 14

19 cleanup and improve infrastructure on brownfield properties in Ohio. The program leveraged more than $10.00 of investment per grant dollar through the redevelopment of more than 380 former commercial and industrial properties, creating more than 3,800 acres of clean development ready land. 49 Although not currently taking new applications, ODSA, through its Office of Redevelopment, continues to administer both programs, 50 in partnership with the Ohio EPA. 51 Those seeking funding assistance for new projects should see the JobsOhio Site Revitalization Loan and Grant Fund described later in this publication. Ohio Air Quality Grant Assistance Program The Ohio Air Quality Grant Assistance (OAQGA) Program is administered by the ombudsman for the Small Business Stationary Source Technical and Environmental Compliance Assistance Program, housed under the Ohio Air Quality Development Authority (OAQDA). 52 The OAQGA Program was created to provide grants and lowercost loans to small businesses in Ohio struggling to meet the mandates of the federal Clean Air Act, as amended in The program, which is financed with proceeds from bonds issued by the OAQDA, helps small businesses purchase air quality equipment needed to comply with federal air quality requirements. The OAQGA Program offers grants equal to 30 percent of equipment costs (postclosing), up to $30,000. The grant is applied as a principal payment on the loan obtained to finance the cost of the equipment, including all reasonable closing costs and legal fees. The grant funds are released after the equipment has been installed and operational for at least six months. When evaluating an eligible small business, the ombudsman will give priority to the federal air quality compliance needs of the county where the small business is located. To qualify a business must have fewer than 100 employees, emit less than 75 tons per year of all regulated air pollutants and emit 50 or less tons of any regulated pollutant. 49 See 50 See website for the published program information and policies at 51 Source: JobsOhio, 52 See O.R.C. section and O.A.C. rule

20 STATE OF OHIO LOAN/BOND PROGRAMS Programs Discussed: 166 Direct Loan Program Industrial Revenue Bond Financing Regional 166 Direct Loan Program Qualified Energy Conservation Bonds Minority Direct Loan Program Property Assessed Clean Energy Bonds Enterprise Bond Fund Program 166 Direct Loan Program The 166 Direct Loan (166 Direct Loan) Program, 53 through ODSA, provides low interest loan financing assistance to businesses for the allowable costs of eligible projects in the state of Ohio. Typically, businesses must commit to create new or preserve existing jobs in the state as well. Generally, ODSA requires the creation or retention, within a threeyear period, of one job for every $35,000 $75,000 of 166 Direct Loan proceeds. Projects at the higher end of this range must have some combination of significant job creation, high average hourly wage, or must be located in a priority investment area. The program also provides financing for eligible projects that improve the efficiency of companies operations and that enhance their effectiveness in the marketplace (retention of jobs will be considered). 54 Eligible projects include those related to industry, commerce, distribution or research activities. Allowable project costs and uses under the 166 Direct Loan are land and/or building purchases, machinery and equipment purchases, building construction or renovation costs, long-term leasehold improvements, ongoing business fixed-asset purchases and capitalizable costs directly related to a fixed-asset purchase. ODSA requires a 10 percent minimum equity contribution in the allowable project costs/uses by the company. 55 The required contribution may be higher, depending on the company s financial and operating position and the project s characteristics. Refinancing and retail projects are ineligible under the program. 53 See O.R.C. sections and See 55 The required contribution may be higher for early stage companies and special purpose facilities. 16

21 The 166 Direct Loan may finance up to 50 percent of allowable project costs with loans ranging from $500,000 to $1.5 million. 56 The 166 Direct Loans are take-out financing, meaning allowable project costs/uses must be capitalized utilizing interim financing from a conventional lender, with the 166 Direct Loan disbursing funds upon project completion. ODSA requires a first or shared-first priority mortgage or lien position on project costs/uses financed with the 166 Direct Loan proceeds. ODSA may also require additional collateral or credit enhancements 57 to secure the loan. The 166 Direct Loan term is based on the useful life of the allowable project costs/uses financed. The term for real estate is up to 15 years, and the term for machinery and equipment is up to 10 years. ODSA does not impose a prepayment penalty. The 166 Direct Loan interest rate is fixed at or below market rates. Companies receiving assistance under the 166 Direct Loan Program are not required to complete their project utilizing the Ohio prevailing wage for construction, renovation and machinery installation. 58 Moreover, businesses requesting $500,000 or less may participate in the Regional 166 Direct Loan Program. Regional 166 Direct Loan Program The Regional 166 Direct Loan (Regional 166 Direct Loan) Program 59 provides lowinterest loan financing assistance to businesses creating new or preserving existing jobs 60 in the state of Ohio. Twelve local economic development agencies around the state administer the Regional 166 Direct Loan Program on behalf of the ODSA. Eligible projects include those related to industry, commerce, distribution or research activities. Allowable project costs and uses under the Regional 166 Direct Loan are land and/or building purchases, machinery and equipment, building construction or renovation costs, long-term leasehold improvements, ongoing business fixed-asset purchases and 56 See 57 Additional collateral or credit enhancements could be: 1) personal guaranties from owners with more than 20 percent ownership in the company; 2) corporate guaranties from related companies; 3) full or partial letter of credit; 4) life insurance on key business owners and/or managers; or 5) other types of credit enhancement, if necessary. 58 The prevailing wage requirement in section was repealed by 129th General Assembly File No. 28, H.B. 153, , effective 9/29/2011 for guarantees and loans in O.R.C. sections and that previously required projects utilizing financial assistance from programs created from these sections to pay laborers and mechanics employed on the project the prevailing rate of wages under chapter See O.R.C. sections and ODSA requires the creation or retention, within a three-year period, of one job for each $50,000 of 166 Direct Loan proceeds. Priority may be given to eligible projects with higher wage and job creation commitments or projects located in a Priority Investment Area. 17

22 capitalizable costs directly related to a fixed-asset purchase. ODSA requires a 10 percent minimum equity contribution in the allowable project costs/uses by the company. Refinancing and retail projects are ineligible under the program. The Regional 166 Direct Loan may finance up to 40 percent of allowable project costs with loans up to $500,000. The Regional 166 Direct Loans are take-out financing, meaning allowable project costs/uses must be capitalized utilizing interim financing from a conventional lender and its equity, with the Regional 166 Direct Loan disbursing funds upon project completion. ODSA requires a first or shared-first priority mortgage or lien position on project costs/uses financed with the Regional 166 Direct Loan proceeds. ODSA may also require additional collateral or credit enhancements 61 to secure the loan. The Regional 166 Direct Loan term is based on the useful life of the allowable project costs/uses financed. The term for real estate is up to 15 years, and the term for machinery and equipment is up to 10 years. ODSA does not impose a prepayment penalty. The initial approval responsibility lies with the regional agency. The loan officer and the agency s board will approve the loan. Upon approval, the loan package is sent to ODSA s Oversight Committee 62 in the Loans & Servicing Office for review prior to submitting to the Ohio Controlling Board. The business may not begin its project until receiving Ohio Controlling Board approval. Doing so could result in the state s determination that the business could proceed without state assistance and therefore does not need the funds. The Regional 166 Direct Loan interest rate is fixed at or below market rates. Companies receiving assistance under the Regional 166 Direct Loan Program are not required to complete their project utilizing the Ohio prevailing wage for construction, renovation and machinery installation, but must create or retain, within a three-year period, one job for each $50,000 of 166 Direct Loan proceeds. Priority may be given to eligible projects with higher wage and job creation commitments or projects located in a priority investment 61 Additional collateral or credit enhancements could be: 1) personal guaranties from owners with more than 20 percent ownership in the company; 2) corporate guaranties from related companies; 3) full or partial letter of credit; 4) life insurance on key business owners and/or managers; or 5) other types of credit enhancement, if necessary. 62 It is the responsibility of the Oversight Committee to review the loan package for information accuracy, completeness and proper due diligence. 18

23 area. 63 Businesses requesting more than $500,000 may participate in the 166 Direct Loan Program, described above. Minority Business Direct Loan Program The Minority Business Direct Loan (MBDL) Program 64 provides low-interest direct loans to certified minority-owned businesses that are purchasing or improving fixed assets and creating or retaining jobs in Ohio. Eligible borrowers include any operating business entity that has been certified by the state equal opportunity coordinator as a Minority Business Enterprise (MBE) and demonstrates that its fixed-asset expansion/retention project will result in job creation for Ohioans. The MBDL Program functions like the 166 Direct Loan Program, except that it is designed to target MBE certified businesses. The program may lend funds to businesses engaged in commerce, manufacturing, research and development, or distribution. Funds received under the program may be used for part of the cost of land and/or building purchases, machinery and equipment purchases, new building construction or renovation costs of an existing building. In addition, limited soft costs related directly to fixed-asset expenditure may be included. Examples of eligible soft costs include architectural and/or engineering costs, installation costs for machinery and financing costs for bank loans. MBDL funds, however, may not be used for working capital, refinancing, rolling stock, inventory/receivable financing, speculative real estate development, relocation costs, office equipment, small tools or supplies. The level of MBDL Program financing is based on particular financing needs but may not exceed 75 percent of eligible project costs. 65 Loan contributions generally range from $45,000 to $450,000, but the director of ODSA may authorize a higher loan amount to address a unique and demonstrated economic development need. 66 Furthermore, like the 166 Direct Loan Program, the MBDL Program is take-out financing, meaning allowable project costs/uses must be capitalized utilizing interim financing from a 63 The prevailing wage requirement in section was repealed by 129th General Assembly File No. 28, H.B. 153, , effective 9/29/2011 for guarantees and loans in O.R.C. sections and that previously required projects utilizing financial assistance from programs created from these sections to pay laborers and mechanics employed on the project the prevailing rate of wages under chapter See O.R.C. sections and The actual level of participation will be determined by ODSA based upon the criteria described in the program guidelines under Criteria for Loan Application Evaluation. See also 66 See 19

24 conventional lender and its equity, with the MBDL Program disbursing funds upon project completion. The interest rate for MBDL financing is currently set at a fixed rate of 3 percent. Companies receiving assistance under the MBDL Program are not required to complete their project utilizing the Ohio prevailing wage for construction, renovation and machinery installation. 67 Enterprise Bond Fund Program The Ohio Enterprise Bond Fund 68 (OEBF), rated AA+ by Standard & Poor s, provides revenue bond financing whereby the Ohio Treasurer of State issues bonds, the proceeds of which are loaned to businesses for allowable costs of eligible projects. The OEBF provides long-term, fixed-rate, one-time project financing for qualifying businesses that create or preserve employment opportunities in the state of Ohio. The OEBF also provides large and small creditworthy businesses with access to capital at costs comparable to those of rated multinational corporations. 69 OEBF bonds may be issued on a tax-exempt basis if the project to be financed satisfies the requirements of federal tax law. Eligible projects include those related to industry, commerce, distribution or research activities. Allowable project costs and uses under the OEBF are land and/or building purchases, machinery and equipment, building construction or renovation costs, longterm leasehold improvements, ongoing business fixed-asset purchases and capitalizable costs directly related to a fixed-asset purchase. ODSA requires a 10 percent minimum equity contribution in the allowable project costs/uses by the company, 70 and a 10% reserve in the amount of the OEBF loan. This reserve may be satisfied by a letter of credit or cash reserve and must remain in place for the term of the OEBF loan. 71 Refinancing and retail projects are ineligible. The OEBF may finance up to 90 percent of allowable project costs with loans ranging from $2.5 million to $10 million. ODSA requires a first or shared-first priority mortgage or lien position on assets financed with the loan proceeds. ODSA may consider a shared 67 The prevailing wage requirement in section was repealed by 129th General Assembly File No. 28, H.B. 153, , eff. 9/29/2011 for guarantees and loans in O.R.C. sections and that previously required projects utilizing financial assistance from programs created from these sections to pay laborers and mechanics employed on the project the prevailing rate of wages under chapter See O.R.C. sections and Source: JobsOhio, 70 The required contribution may be higher for early stage companies and special purpose facilities. 71 See 20

25 position with participating third party lenders. This position is established via a multiparty agreement between the participating lender(s), ODSA and the borrower. ODSA may also require additional collateral or credit enhancements 72 to secure the loan. The OEBF term is based on the useful life of the allowable project costs/uses financed. The term for real estate is up to 15 years, 73 and the term for machinery and equipment is up to 10 years. The interest rate is fixed for the term of the loan and is determined by the market when the bonds are sold. Companies receiving assistance under the OEBF Program are not required to complete their project utilizing the Ohio prevailing wage for construction, renovation and machinery installation, 74 but must create jobs within a threeyear period, with one new job created for every $35,000 - $75,000 of proceeds loaned from the OEBF Program. Projects at the higher end of this range must have some combination of significant job creation, high average hourly wage, or must be located in a priority investment area. 75 Industrial Revenue Bond Financing Industrial Revenue Bonds 76 (IRBs), also referred to as Industrial Development Bonds, are bonds that are issued by a state or local political subdivision that empower these entities with the ability to issue tax-exempt or taxable bonds on behalf of a company. The proceeds from the sale of the IRBs can be loaned to manufacturing, distribution, commercial or research facilities 77 that utilize the proceeds for various economic development purposes including, but not limited to, the financing of land, the expansion or construction of buildings, and the purchase of machinery and equipment. If properly structured, IRBs can bear interest at tax-exempt interest rates. IRBs can also be used to finance a project in conjunction with other state and federal programs and funds. 72 Additional collateral or credit enhancements could be: 1) personal guaranties from owners with more than 20 percent ownership in the company; 2) corporate guaranties from related companies; 3) full or partial letter of credit; 4) life insurance on key business owners and/or managers; or 5) other types of credit enhancement, if necessary. 73 In certain cases, loan terms can range 15 to 20 years for real estate. 74 The prevailing wage requirement in section was repealed by 129th General Assembly File No. 28, H.B. 153, , effective 9/29/2011 for guarantees and loans in O.R.C. sections and that previously required projects utilizing financial assistance from programs created from these sections to pay laborers and mechanics employed on the project the prevailing rate of wages under chapter See 76 See O.R.C. chapter See O.R.C. section (H). 21